Quick Comment: Swiss economic activity
Punchline: SECO’s index of weekly economic activity shows that economic activity declined following the tariff announcement on “Liberation Day” and has been recovering gradually since. The KOF Economic Barometer, a monthly indicator, conveys a broadly similar message.
SECO developed a new index of weekly economic activity (WEA) in November 2020 to monitor economic conditions during the COVID-19 pandemic. At the time, traditional indicators were too slow to capture the rapidly evolving economic situation.
Although originally intended as a crisis tool, the WEA continues to be published and now offers a valuable gauge for assessing whether, and how, Swiss economic activity has been affected by recent US trade policy announcements and the appreciation of the franc.
The WEA is based on nine high-frequency indicators and measures real economic activity relative to the same week in the previous year. It includes card transactions and cash withdrawals (to capture household consumption), foreign trade in goods, electricity use, air pollution, and rail freight traffic (as proxies for industrial activity), registered unemployment, and weekly SNB sight deposit data, which reflect financial market pressures and economic uncertainty. The index is highly correlated with quarterly GDP and provides a timely snapshot of overall economic conditions.
The chart below shows that the WEA rose in February, fell sharply in April, and has been gradually recovering since—pointing to some weakness in activity but no major downturn.
Source: SECO
The WEA can be compared with the KOF Economic Barometer, a composite leading indicator published by the KOF Swiss Economic Institute since the 1970s. While the WEA captures current developments, the Barometer is designed to signal the likely near-term performance of the Swiss economy.
In May, the Barometer rose by 1.4 points to 98.5, partially reversing the decline in April, when it had fallen to 97.1 from 103.3 in March. Despite this improvement, the index remains below its medium-term average, suggesting a subdued outlook.
Source: KOF
Taken together, these indicators suggest that Swiss economic activity weakened in April following the US tariff shock and the resulting appreciation of the franc. However, the decline does not appear severe and offers little reason for the SNB to consider a large interest rate cut at this week’s policy meeting.